The Great Serbian Charity Dispute

It was a huge publicity pop for a new group seeking to make a splash in the worldwide Serbian community. Last year, 28.Jun, formed by Serbian students in the U.S. and Canada to defend their ethnic persona, got a lot of attention by announcing that, with the help of a little-known Seattle-area foundation, it had shipped $1.5 million of donated medical supplies to support embattled Serbs in Kosovo. A "Herculean task," 28.Jun declared proudly on its web page, festooned with pictures of the container shipment being loaded at a Puget Sound warehouse.

But now, nearly a year later, some of the glow is off that deal. 28.Jun cannot document the big $1.5 million valuation it announced for that shipment, although it continues to cite that the figure. Using what is said to be a list of the shipment's inventory compiled after arrival in Kosovo, an expert in donated medical supplies consulted by Forbes, who asked not to be identified, estimated the value at a lot less--around $500,000. A recent online post by 28.Jun suggests its out-of-pocket cost for the project was less than $40,000.

Eagle's Nest Foundation, the obscure Seattle-area charity that facilitated the shipment out of donated inventory it already had on hand and which 28.Jun says provided the $1.5 million valuation figure, didn't respond to repeated inquiries from Forbes seeking a detailed accounting. Eagle's Nest claims on its Web site to have shipped "over $80 million in medical supplies to more than 25 countries" since its founding in 2003. Yet the six years of its 10 years for which its federal tax returns are easily available, 2006 to 2011, show total charitable expenditures of just $453,000--none of that identified as donated goods. Although Eagle's Nest, based in the Seattle suburb of Mukilteo, has U.S. federal tax-exempt status and a formal classification as a public charity, it is not registered as a charity with Washington State regulators.

Moreover, all over this deal are the fingerprints of Universal Aide Society. That's a Nanaimo, B.C., relief agency that was stripped of its tax-exempt statusin Canada following a government audit that concluded, among other things, it had greatly overstated the value of donated goods for tax purposes. Universal Aide played a key role through a third party in getting together 28.Jun and Eagle's Nest. Universal Aide and its director, Shirley Gremyachev, did not respond to a detailed request-for-comment message sent through its website.

Nanaimo is located on Vancouver Island, which is also the home of Filip Filipi, 28.Jun's founder and president. But Filipi, a 20-something music rapper, told Forbes he had never heard of Universal Aide or its checkered past and was unaware of its connection with the 28.Jun shipment until after questions were raised months later.

On top of all this, another Serb humanitarian group that first raised questions about the valuation also said the shipment actually went to a facility in Kosovo under the authority of ethnic Albanians, hated rivals of the Serbs. Within the fiercely proud and protective Serbian community this is quite an incendiary charge, especially about an organization that has raised funds from Serbs. It has triggered massive chatter on Serbian-language websites in several countries. 28.Jun says the facility is Serbian, as does the facility itself.

The controversy is yet another to arise in the philanthropic world over the valuation of gift-in-kind, as donated goods going to charity are called. Their noncash nature renders them prone to valuation exaggeration that can impress would-be cash donors, burnish reported financial efficiencies or enhance reputations. Forbes has been writing about this issue for a long time (see here and here). In November, World Help, a big international aid charity in Forest, Va. , admitted it had overvalued goods received by more than double. The nonprofit said it was the victim of fraud by a rogue consultant. Forbestook World Help offits annual list of the largest U.S. charities.

Compared to Operation Compassion, 28.Jun and its humanitarian efforts are small beer. But unlike Operation Compassion, 28.Jun and its leaders played the big valuation for all the publicity they could get among among their fellow Serbs.

28.Jun was formed in 2011 and at various times has been described as being based in Chicago or Toronto. According to its Web page, the mission is to engage in "political, social and philanthropic functions pertaining to Serbian interests" with efforts that include "fundraisers, which go towards supporting Serbian interests and humanitarian efforts." It is now registered as a not-for-profit corporation in Canada, but does not appear to be registered as a tax-exempt organization in the U.S. 28.Jun received some attention two years ago when it complained of disparaging remarks about Serbs on the TV show, "Chelsea Handler Lately." The group's name comes from the date of the Battle of Kosovo in 1389 in which an army from the Ottoman Empire defeated a Serbian force. Redolent with religious overtones--the Ottomans were Islamic, the Serbs Christian--the conflict remains an important symbol of Serbian nationalism.

Once part of Yugoslavia and then Serbia, Kosovo is a region that in 2008 declared its sovereign independence--recognized by the United States and NATO and guaranteed in considerable measure by a continuing United Nations military presence. Serbia still claims Kosovo, even though Serbs are a small minority to the ethnic Albanians, who control the government.

Sometime in 2011, 28.Jun hit upon the idea of raising funds to send a humanitarian shipment of medical supplies to Gracanica. That's a Serb enclave of about 11,000 persons in Kosovo best known for a nearby 692-year-old Serbian Orthodox monastary. The name of the fundraising campaign: "Battle for Kosovo." At some point 28.Jun organizers were in contact with Milos Supica. A Serb who fled the Balkans as a youth and ended up in the United States, he is the long-time head of Direct Effect USA, a respected humanitarian agency he started nearly two decades ago in Stockton, Calif., as Save Serbian Children. Despite its name, Save Serbian Children has arranged shipment of supplies to the needy in a score of countries around the world. Now 73, Supica is retired from his career as a businessman in auto parts and repairs, relocating a few years ago to the more scenic Smokey Mountains town of Sevierville, Tenn.

Seeing the Canadian address of the 28.Jun leadership, Supica told Forbes that he contacted Universal Aide Society, also in Canada. Supica said he never had done business with Universal Aide but heard it was involved in humanitarian work. He insisted he was unaware at the time of its regulatory baggage, although that would have come up in a Google search.

Supica said Universal Aide director Gremyachev responded by email with a 1,500-item-long shipping list of medical supplies that could be sent by Eagle's Nest Foundation, the charity in Mukilteo, Wash., upon payment of a fee of $2,000, plus shipping costs. "I had never heard of Eagle's Nest," Supica said. He said the connection between Universal Aide and Eagle's Nest was never explained to him, but that he assumed they had been doing business together for some time. He said he forwarded the charity's name and contact information, and that 1,500-item shipping list, to 28.Jun. Supica, who said he had little more to do with the shipment, said he never mentioned the role of Universal Aide to 28.Jun.

Eagle's Nest was founded a decade ago by Jeanne and Dayoung Kimn. The charity's website says the couple acted "after two decades of experience traveling in developing countries to aid and train people in need." Eagle's Nest seems to operate almost invisibly. There has been scant mention of it in local media. Its address is a small out-of-the-way garage facility near a road leading to one of the many ferry terminals serving Puget Sound.

As for how it functions, the web site says the charity "receives medical supplies as donations from hospitals, clinics, supply companies, and private individuals" and that "all donations are tax deductible and receipts are available upon request." Given this language and the lack of any response to Forbes inquiries, it's rather difficult to square the $80 million-plus-of-donations claim on the Web site with their virtual absence from tax returns.

Over at 28.Jun, Filipi, whose Serbian grandmother fled Kosovo, said his organization got in touch with Jeanne Kimn. The $2,000 Eagle's Nest fee was paid, he said, along with shipping costs. In March 2012, a group of 28.Jun supporters gathered at the Eagle's Nest garage in Mukilteo to load--in front of their photographers--a standard 40-foot-long container with boxes. Filipi said the boxes were already filled and sealed. Jeanne Kimn, he said, was present and keeping track of things. The truck went to the nearby Port of Seattle, where the container was put on a ship. After transfer to a truck in Europe, the goods arrived in Kosovo sometime during the summer.

Filipi said he never saw a manifest or inventory with written valuations for each line or a written total at the bottom. But at some point, he said that Eagle's Nest informed 28.Jun that the value of the shipment was $1.5 million. That's the number that 28.Jun put out as it thanked various supporters, including Supica and Direct Effect USA. In a statement to Forbes, 28.Jun said, that figure was in emails copied to Supica and that there was no initial objection. "Given that Mr. Supica and Eagle's Nest have combined 30 years of experience in humanitarian work and that we were pioneers in this field, we felt no reason to doubt their estimation of the container's worth," 28.Jun said.

By its own account, 28.Jun had held fundraising events in 120 cities around the world for the project. But according to a bar graph chart that 28.Jun posted online, the total cost of the $1.5 million project was just $39,250, raised from online donations, fundraising events and contributions by members.

Eventually, Supica said he got to thinking. "I've been sending containers to various places, including Africa, for a long time," he said. "You can't put $1.5 million in one container unless it's gold." So he sent that 1,500-item list to a friend in the humanitarian assistance field to value. That estimate: $225,000.